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Why Aren't More U.S. Retailers Adopting RFID?

A variety of factors, from misinformation about performance to cultural issues, have prevented RFID from becoming a mainstream in-store technology.

By Mark Roberti

Oct 01, 2009—Radio frequency identification has been considered an important emerging technology since June 11, 2003, when Wal-Mart CIO Linda Dillman said the retail giant would require its top 100 suppliers to put RFID tags on pallets and cases starting in January 2005. Six years later, Wal-Mart still doesn't have RFID interrogators in every store, and few other retailers have jumped on the RFID bandwagon. Why?

There's no simple answer. Many factors contribute to the speed at which technology adoption takes place, and some adoptions that seem to take place overnight really have been incubating for years. RFID is not as easy to deploy as, say, desktop computers, Internet technologies or enterprise resource planning (ERP) software. Computers require asset purchases and training, but simplify manual tasks, such as managing budgets and typing letters. Internet and Web technologies require a lot of cabling and coding, but deployments remain largely within the IT department's control. Even ERP systems, which involve big, complex software installations, typically involve IT managing deployments and training.

RFID deployments are more complex, because they involve dealing with the physics of radio waves. For some products that are RF-friendly, such as apparel and paper products, this isn't a problem. But for products that contain a lot of water—most meat and vegetables, for instance—or are packaged in or made of metal—foil-lined bags, food cans and so on—the RF issues can be challenging. The RFID industry has overcome them, to a large degree, but the perception that RFID won't work around water and metal persists in the mainstream business press and in the minds of some businesspeople.

In addition to physics, there is the challenge of how to deal with the data collected. Because each tagged item is associated with a unique serial number, and tags can be read many times by one or more readers, companies must be able to filter the data and integrate it into their back-end systems. End users rank this as their biggest concern about RFID deployments, according to some surveys.

This challenge may not be as massive as is generally perceived. During the RFID in Fashion event hosted by RFID Journal and the American Apparel and Footwear Association in New York in August, Zander Livingston, director of RFID at American Apparel, said his company has set up in-store systems that use RFID to manage store inventory and replenishment; the data is transferred to existing back-end systems, where it's treated as bar-code data. Simon Langford, director of EPC RFID strategies at Wal-Mart, said his company is taking essentially the same approach.

The bigger obstacle to RFID adoption is a lack of understanding about what data can be collected, and how it can be used to reengineer business processes and reduce costs or increase sales. Nowhere are the benefits clearer than in the retail apparel sector, where studies by the University of Arkansas' RFID Research Center show that inventory accuracy is roughly 60 percent to 65 percent—meaning 35 percent of the time, stores have inventory they don't know they have, or don't have inventory they think they have.

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